Payment made to third party

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Anil Kumar Kedia (Querist)
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16 September 2008 We are a contractor and take the delivery of diesel pump. Some time diesel pump owner ask us to give payment in favour of his creditor i.e. Indian oil from which he takes diesel. Is correct to make the payment of third party on behalf of our creditor under which rule of Income tax.

Anil Kumar Kedia

Anil Kumar Kedia (Querist)
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16 September 2008 In similiar type we make the payment to third paraty on behalf of our contractor. is it corrrect

CA. O.P. Agarwalla

CA. O.P. Agarwalla (Expert)
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16 September 2008 Section 40A(3) restricts the payment of expenditure in excess of Rs 20000/-, but it is not mandatory that the cheque/dd should only be drawn in favour of person from whom the goods or services have been purchased.

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